Box stock priced at 14, above the estimated range, and sold 12.5 million shares. The stock peaked at 24.73 and closed at 23.23. The strong performance came despite Box showing huge losses on the bottom line.
Box's founders, CEO Aaron Levie and CFO Dylan Smith, take turns striking a ceremonial bell Friday at the New York Stock Exchange.
30-year-old Box CEO Aaron Levie
Box revenue rose 80% to $153.8 million for the nine months ended Oct. 31. But the company lost a net $121.5 million. Box spent $152.4 million on sales and marketing in that span, up 23% from a year earlier. Another $48.4 million went for research and development, up 49%.
Box says its annual recurring revenue — the value of subscription contracts likely to recur over 12 months — is $225 million .
Box is spending heavily to draw in more customers, with the idea being it will turn profitable down the road. It's a recurring theme for tech IPOs.
Box says it has more than 44,000 paying corporate customers or organizations and 32 million registered users. The basic service is free, with fees charged for premium services.
In its IPO road show to institutional investors, Box presented a long-term outline for profitability, said Francis Gaskins, founder of IPOdesktop.com and research director for Equities.com.
Another reason for investor enthusiasm is Box's transition from data storage into the broader field of enterprise content management, a category with huge market potential.
"Box is losing money now, but their long-term financial goal is 20%-to-25% free cash flow on revenue," he said.
Boxed In By Rivals?
Box was the first IPO of a company in its category, albeit one with many rivals. They include Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Dropbox, which is expected to IPO this year.
Eleven new issues are planned for the week of Jan. 26, expected to raise about $1 billion. That's the most in one week since the 13 IPOs in the first week of October that raised $2.9 billion, according to IPO research firm Ipreo.
Among the IPOs coming is Shake Shack, which looks to raise $75 million. The fast-casual burger chain will follow Habit Restaurants (NASDAQ:HABT), which popped 120% on its Nov. 20 debut, closing at 40.25. The stock priced at 18 and currently trades near 30.
Another closely watched IPO in the coming week is Spark Therapeutics, which is developing gene therapies for retinal dystrophies and hematologic disorders. It plans to raise $88 million.
Nine of the 11 IPOs slated for the coming week are in the health care field, maintaining the hot streak from 2014.
Last year was the best IPO market since 2001. The year ended with 273 IPOs, up 23% from the prior year, according to Renaissance Capital. Proceeds leaped 55% to $85 billion, led by Alibaba (NYSE:BABA), which raised $22 billion in its record-setting IPO.
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